Economy
CBN Injects $9b into Forex Market in 7 Months—Report
By Modupe Gbadeyanka
Not less than $9 billion has been released to the foreign exchange (forex) market in the last seven months by the Central Bank of Nigeria (CBN) in order to keep the Naira at the current rate it trades at the market, Daily Trust is reporting.
The apex bank started its regular intervention on February 21, 2017 and the forex sales were intended to cover for personal and business travels, medical needs, and school fees, futures market and other approved transactions.
Since then till August 31, Daily Trust said about $9 billion has so far been released based on all the official data of forex sales released to the public by the CBN within the period.
When this intervention began, the local currency was being traded at over N520 per Dollar, but at the moment, it has been hovering around N360 to N370 per Dollar.
On February 21, when the CBN interventions began, the CBN offered for sale $370,810,810.79 to 23 banks to meet the “visible and invincible” requests of customers. At the end of February, the CBN had sold out some $550,900,000 in interventions.
Over the next six months FX sales by the CBN were as follows: March; $1,022,000,000; April, $1,321,860,000; May, N1, 422,800,000; June, $1,651,500,000; July, $1,638,800,000 and August, $1,301,000,000.
Thus in seven months, CBN had intervened in the forex market to the tune of $8,908,860,000. Within the period, the Naira appreciated from N520/$1 to N365 to the Dollar at the parallel market.
The forex intervention also doused tensions in the forex market and forced rent seekers out of the market.
But experts wonder whether the cost to the country of nearly $9 billion, against the gains recorded are worth it.
They argue that it is worrying the CBN is funding the market more than the private sector investors,. The private sector ideally should fund the FX market more than the Central Bank, they argue.
Prior to Nigeria’s forex crisis, the market was funded by both the private sector and the CBN.
At the beginning, Nigeria had about $2.7 billion foreign investment from the JP Morgan and $500 million from Barclays but all of these monies were taken out when the CBN tightened controls on the Naira.
Nigeria’s external reserve dropped to $28 billion and the CBN couldn’t meet a lot of forex demands such as the repatriation of funds by the airlines.
To conserve the foreign reserve, the CBN had even stopped funding BDCs and invisibles in addition to restriction of forex on 41 items.
Mr Moses Azege, a Lagos based financial expert said the CBN intervention was unusual, the market didn’t expect it but it worked in stabilising the market.
“Before the intervention, the market was volatile, a lot of profiteering and the banks also got into the business of round tripping,” he said.
He however noted that, the intervention averted the forex apprehension, and ended business for rent seekers and speculators.
On whether the CBN move was sustainable he said, so far, the CBN has shown it can sustain it with the level of interventions.
Mr Rislanudeen Mohammed, the former Acting Managing Director, Unity Bank Plc, said the “Central Bank intervention over the last several months has impacted positively in stabilizing the foreign exchange market and reducing the gap between parallel and black market rates from about N520 to a dollar to the present rate of about N365.”
The “Forex liquidity has also helped in reducing the impact of cost push and imported inflation as evidenced by consistent reduction in core inflation data to present level of 16.05 percent as released by National bureau of statistics. Introduction of NAFEX has also improved transparency in the market hence incentivizing foreign portfolio as well as direct investments” he noted.
However, he explained that “sustaining this intervention is both unrealistic and impossible in the long term. Note that positive oil price, improved oil output as a result of reduced sabotage by Niger delta avengers as well as output quota waiver by OPEC combined to support improved forex income earnings and consolidating improved foreign reserves despite the intervention and attendant depletion of the reserve. Those three factors may not last ad infinitum. To consolidate on success made so far, we need to expeditiously walk the talk in export income diversification.”
On whether the naira can exchange for N200/$1 in the near future he said, it is basically a function of demand and supply. But even the IMF is looking at N365 as the official rate. But it can be determined by market forces” he said.
Nigeria’s foreign exchange reserves stood at a two and a half-year high of $31.81 billion as of August 29, the CBN data showed yesterday.
The latest figure was at a level it last reached in January 2015. Experts have attributed the appreciation of the local currency to the growth in the external reserve and ability of the apex bank to provide enough forex for the market.
By Adedapo Adesanya
Four securities weakened the NASD Over-the-Counter (OTC) Securities Exchange by 1.95 per cent on Friday, erasing N41.17 billion from the bourse, which had its market capitalisation at N2.567 trillion compared with the previous session’s N2.618 trillion.
In the same vein, the NASD Unlisted Security Index (NSI) decreased at the close of business by 85.28 points to 4,277.07 points from 4,362.32 points.
The price decliners were led by 11 Plc, which gave up N20.50 to sell at N200.50 per share compared with the preceding day’s N221.00 per share, FrieslandCampina Wamco Nigeria Plc dropped N16.94 to close at N155.20 per unit versus Thursday’s closing price of N172.14 per unit, Central Securities Clearing System (CSCS) Plc went down by N2.11 to N84.68 per share from N86.79 per share, and Afriland Properties Plc lost 11 Kobo to end at N16.74 per unit, in contrast to the N16.85 per unit it closed a day earlier.
During the trading day, the value of transactions jumped by 172.1 per cent to N29.9 million from the preceding session’s N10.9 million, and the volume of trades soared by 136.5 per cent to 955,096 units from the previous 403,901 units, while the number of deals went down by 11.4 per cent to 31 deals from 35 deals.
Great Nigeria Insurance (GNI) Plc remained the most active stock by value on a year-to-date basis, with 3.4 billion units valued at N8.4 billion, followed by Infrastructure Credit Guarantee (Infracredit) Plc with 2.3 billion units worth N6.5 billion, and CSCS Plc with 68.6 million units sold for N4.7 billion.
GNI Plc also ended the session as the most traded stock by volume on a year-to-date basis, with 3.4 billion units exchanged for N8.4 billion, trailed by Infracredit Plc with 2.3 billion units traded for N6.5 billion, and Resourcery Plc with 1.1 billion units transacted for N415.7 million.
By Dipo Olowookere
The last trading session of this week on the floor of the Nigerian Exchange (NGX) Limited ended on a negative note, with a 0.66 per cent loss on Friday.
This was influenced by sustained selling pressure and cautious trading, which forced investors into profit-taking.
Data obtained by Business Post showed that the energy sector fell by 4.66 per cent, the insurance counter dipped by 2.23 per cent, the consumer goods index depreciated by 0.96 per cent, and the banking segment shed 0.28 per cent, while the industrial goods space remained unchanged.
At the close of business, the All-Share Index (ASI) of Nigeria’s stock exchange went down by 1,531.81 points to 232,049.02 points from 233,580.83 points, and the market capitalisation dropped N983 billion to settle at N148.905 trillion compared with Thursday’s N149.888 trillion.
Aradel was the worst-performing equity after it lost 10.00 per cent to close at N1,417.50. International Energy Insurance slipped by 9.95 per cent to N5.79, Trans-Nationwide Express depreciated by 9.89 per cent to N3.28, eTranzact crashed by 9.79 per cent to N14.75, and UPDC slumped by 9.72 per cent to N28.12.
The best-performing equity for the day was Universal Insurance, which gained 6.32 per cent to close at N1.01, McNichols grew by 5.52 per cent to N8.60, Linkage Assurance expanded by 4.67 per cent to N1.57, NGX Group appreciated by 4.35 per cent to N120.00, and Transcorp increased by 3.62 per cent to N41.50.
As look at the activity level indicated that investors traded 388.7 million stocks worth N18.4 billion in 44,631 deals compared with the 393.7 million stocks valued at N19.2 billion executed in 45,813 deals a day earlier, representing a decline in the trading volume, value, and number of deals by 1.27 per cent, 4.17 per cent, and 2.58 per cent, respectively.
By Adedapo Adesanya
The Naira recorded a loss of 82 Kobo or 0.06 per cent against the United States Dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEX) on Friday, June 26, exchanging at N1,380.93/$1, in contrast to the previous day’s rate of N1,380.11/$1.
Equally, the domestic currency further weakened against the Pound Sterling in the official FX market yesterday by N6.06 to settle at N1,824.90/£1 versus the preceding session’s N1,818.84/£1, and lost N10.74 on the Euro to sell at N1,577 .58/€1 versus N1,566.84/€1.
At the GTBank forex counter, the Naira depreciated against the greenback during the session by N4 to close at N1,387/$1, in contrast to Thursday’s value of N1,383/$1, and at the parallel market, it was unchanged at N1,395/$1.
Interbank FX activity among financial institutions has fluctuated amid a sharp slowdown in forex market interventions by the Central Bank of Nigeria (CBN), as it allows demand and supply to move the market.
Also, a stronger greenback has generally put significant pressure on emerging-market currencies.
Nigeria has accessed the first tranche of a proposed $5 billion derivatives financing arrangement with First Abu Dhabi Bank PJSC, the largest lender in the United Arab Emirates (UAE).
The $5 billion facility, approved by the National Assembly earlier this year, is part of the federal government’s plan to diversify external financing sources and reduce borrowing costs. Structured as a Total Return Swap with First Abu Dhabi Bank, proceeds are earmarked for refinancing debt and supporting infrastructure financing.
If the proceeds are brought into the country through the official FX market, the transaction will increase the currency reserves or Dollar liquidity.
At the cryptocurrency market, Solana (SOL) grew by 2.2 per cent to $71.92, Cardano (ADA) gained 1.1 per cent to trade at $0.1474, Ripple (XRP) also appreciated by 1.1 per cent to $1.05, Dogecoin (DOGE) expanded by 0.9 per cent to $0.0755, and Ethereum (ETH) improved by 0.4 per cent to $1,578.84.
On the flip side, TRON (TRX) slid 0.6 per cent to $0.3203, Binance Coin (BNB) slumped by 0.3 per cent to $564.33, and Bitcoin fell by 0.2 per cent to $60,219.37, while the US Dollar Tether (USDT) and the US Dollar Coin (USDC) traded flat at $1.00 each.
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